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Back to basics on VBC

By Daniel Kuzmanovich

March 15, 2022

    Is health care as an industry on the same page when it comes to value-based care? As we've been talking about it for at least 15 years with little progress but to make the term into a buzzword, my guess is no. 

    So, let's take a minute and make sure we are all on the same page during this wave of renewed interest in VBC.

    Radio Advisory episode: How do we define value? Here's what we learned from our cross-industry summit.  

    What is VBC?

    • Value-based payment is just a different financing mechanism. Under value-based payment models, providers organizations are incentivized to keep quality high and costs low instead of payment tied to volumes.
    • Value = Quality / Cost. The value of care is the quality of care relative to the cost required to deliver it. Value is usually defined and measured by the payer.
    • Risk inherent in value-based payment. Any value-based payment means some or all of a provider organization's reimbursement is at-risk. Risk can take the form of incentives (upside), penalties (downside) or total (capitation).
    • Someone is always at risk. A purchaser's risk is the direct inverse of a provider organization's risk. So even if a provider organization has no risk or only upside risk, the plan covering that patient is at risk for the services provided. For suppliers, if you know the amount at risk and whether it's an incentive or a penalty, you know what your customer cares about.
    • Contracts vary. And this is the toughest part. A single provider organization or health plan likely has several different contracts that all look different.

    What is the future of VBC?

    • The shift to value-based payment is surprisingly well underway. Though most provider organizations are still driven mostly by fee-for-service, they are well on their "path to value."
    • And only likely to continue. The ongoing effects of Covid-19 have provider organizations, payers, and the Biden administration all increasing their interest in value-based payment models.
    • Short-term decrease, long-term increase. Some in the health care industry are concerned the Covid-19 pandemic will derail the industry shift to value-based payment. While a short-term stall is likely as provider organizations recover from the pandemic, it's likely the net result of the pandemic is an increase in the shift to value-based payment.

    How do provider organizations succeed at VBC?

    • Analytics are the foundation of successful population health. While getting actionable, timely data is difficult, the ability to segment patients by level of risk is the most important capability for any organization to be successful under risk. If there is a place where an executive should over invest their resources, this is it.
    • Care models must evolve. Success under value-based payment fundamentally means segmenting the patient population and providing varying levels of service based on patient risk. This requires doing some things differently for some patients rather than a one-size-fits-all approach. And these models can't be static—they must evolve as care advances and contracts change.
    • Telehealth is here to stay. And this is great for population health efforts if the industry continues to evolve and improve their virtual care offerings.  But, if you don't do a good job, someone else will.
    • Behavioral health is the new must have. The pandemic only exacerbates the demand for behavioral health services even outside the traditional bounds of population health. Using tele-behavioral health and establishing clear paths from the physician to the behavioral health specialists are now non-negotiable.
    • Social determinants of health a new but promising frontier. Though new for much of the industry, addressing health equity is one of the most impactful population health initiatives you can take. The good news is provider organizations have places they can start and build from as they drive community impact at scale—and there is plenty of room for other stakeholders to serve as a partner. 

    Value-based care should be more than a buzzword

    imageCommercial risk will either tip the industry towards value-based care or keep us in a world of hybrid incentives. It’s complicated, but is it possible? We think so. Learn how you can help push us towards a new cost and quality standard by visiting

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